Moz@Work

Over the next decade, the notion of the operating system is going to change immensely. Developing applications that only run on a local PC will become irrelevant with virtualization and the increasing capabilities in web browsers. More and more applications will get built for the cloud first, consumable on any device. This is also a boon for developers who can now scale incrementally to a customer ready solution with much lower costs, and even gain access to an out-of-the-box revenue stream from day 1 with search origination fees. It’s an exciting future that can really light up the tech industry. I am proud that Microsoft has seized this opportunity to rally around a true cloud computing platform that enables developers to leverage skills to enter this new era through Windows Azure. Ray Ozzie will be talking about this today at the Professional Developers Conference if you are interested. Large companies the size of Microsoft are not easy to turn, but over the last 4 years I have witnessed a commitment to the cloud across all of our products that is incredible to see. Things may look a bit patchwork at times, but the direction is clear. Expect to see more here from us over the next few years!

The Windows Azure platform offers an intuitive, reliable and powerful platform for the creation of web applications and services.

The Windows Azure platform is comprised of Windows Azure: an operating system as a service; SQL Azure: a fully relational database in the cloud; and .NET Services: consumable web-based services that provide both secure connectivity and federated access control for applications.

Currently in Community Technology Preview (CTP), the services are free to evaluate through January 2010. We will begin charging customers on February 1st, 2010.

Years ago (OK, maybe it was just four years ago but that’s a lifetime in online world) we were contemplating making Spaces into much more of a platform that would allow others to build customized experiences on top, but using our ID, storage, relationships info and core user experience. By using the same infrastructure, a user could be in multiple niches and still find it easy to move between them with single sign on, content reposts, aggregation etc. Not that dissimilar to what Ning has been doing in some ways. It didn’t fit with the direction Windows Live was going in so we abandoned it.

Fast forward a few years and it’s great to see some validation to this approach. Ali just sent me a link to below website for Amish people dating. To be clear, according to this website, there are 233,000 Amish adults and children. Let’s say 10% are inclined to date …. that’s just 23,000 users target market. Even if you have 30% penetration, that’s about 6,000 users on your service. Pretty niche I’d say.

I’m not sure which way things will go. Facebook continues to be an all things for all people, where it is becoming increasingly unwieldy. But at least everyone I know is there. Niche sites offer closer communities, but I have to sign up for multiple sites. Best of luck to Ning in trying to make this a false choice by developing the back end to enable such niche sites to flourish.

Great article in New York Times on “Cisco’s Run of Spending”. The article talks about the $22 Billion of acquisitions Cisco has done since 2002 (and doesn’t even mention the billions more before that). The case is pretty damning for Cisco overall ending with the statement “After 10 years of searching for the promised land of growth, it’s time for something different. Slowing acquisitions would a good start. If the strategy’s benefit isn’t apparent after a decade of purchases, it is hard to see how it will appear magically now.” Some other key points:

• Cisco purchased $60B of stock but the outstanding shares decreased by only 1.3B (current outstanding shares = 5.79B) due to dilutive acquisitions and options.
• John Chambers (CEO) claimed growth could increase by 50% a year over the long run. Actual growth has been closer to 7% per year.
• They have 26 new product areas that could account for $1B in new revenue in near term. I don’t know how anyone can even remember 26 things to “focus” on.

I took a look at Cisco’s revenue breakdown and M&A by business unit recently. As you can see from the numbers, in the last five years M&A in the core switches and routers group has slowed down a lot as Cisco has dominant market share in those segments and there aren’t that many big companies to buy. Growth in this segment is also in single digits. Most of Cisco’s growth has actually come from acquired companies dumped into the Advanced Technologies Group (ATG) which supports the premise of the NYT article.

The telling thing is that Cisco has put all these new acquired businesses into one group rather than baking into core business units. What that really screams out is Cisco doesn’t know what to do with the acquisitions and is desperate to show growth. That’s why it needs 59 councils to manage the acquisitions. That’s why core business groups are often prevented from doing things that make sense for them, but not the new hot business in the ATG. I could be proved wrong, but I can’t see how this is sustainable from a shareholder economics or management perspective.

The other factor is that a lot of the ATG acquisitions are “end customer businesses” that drive up demand for Cisco’s core network gear and allow them to charge a premium. Great strategy ….. but what does it mean for customers? Customers get all the capabilities they expect, but in a real patchwork manner. For example, in Unified Communications, Cisco has multiple soft phone clients that don’t work in the same way, they have several meeting/conferencing products, they are schizophrenic on need for email and have now acquired a company and all the backend administration for these is different. It is hard to build a clean user friendly user experience at the best of times, but almost impossible if you are trying to do it with patched acquisitions. Cisco’s new approach is to build a middleware layer to hide the complexity and plug into companies that can be trusted with user interfaces. But that begs the question for customers on why they would want to do this when they can get an integrated solution from other vendors.

Let’s see how Cisco’s strategy goes. But initial sense is that it is bad for shareholders, bad for employees and bad for customers.

Would Yahoo CEO Carol Bartz have accepted Microsoft's $40 billion-plus takeover offer last year if she had been in charge of the company then? "Sure, do you think I'm stupid?" Bartz said in an interview Thursday on CNBC, the business-news cable channel. Read more here.

Fascinating to read about a recent pitch that Avaya made on NoJitter about their views on the demise of the deskphone hypothesis. Instead of defending the value of the deskphone, Avaya chose to attack the PC. The essence of Avaya’s argument is that PC’s are unreliable, not on when you need it, questionable quality and that users want a desk phone. They even make a pitch for a better together story that preserves the legacy mode ….

“We can all have our cake and eat it, too, btw...use whatever IM Client we want on the desktop to make Click-to-Communicate easy for the User, ubiquitous within the Enterprise and simple to Admin--while keeping it Scalable, Reliable and Feature-rich, simply by gluing two solutions (e.g. OCS + Avaya) together in a true "Best-of-Breed" fashion.” 

It’s telling that this is a direct attack against Office Communicator, which says a lot about where these guys heads are at. I guess if everyone wants red and you only sell black, you have to attack the red. But that doesn’t quite take into account the momentous changes in the communications industry taking place, driven by demographic changes and by need to cut costs. Like many industry giants in the last 100 years, Avaya misses the point here. Avaya is in classic innovators dilemma mode here – how do I maintain a revenue stream of $200/user with 50%+ margin from deskphones when everything points to alternatives as the future. If the total acquisition cost of a UC solution is in the $800 range per user, that deskphone represents 25% of your revenue and more in profit. You don’t want to lose that. I feel for Avaya; Microsoft has been in some of these dilemmas too. But the only way out is to read the writing on the wall and invest in the future.

I would never tell anyone that PC is the only way to go. In fact, I have an IP Phone in my office and a PC. The key thing to realize is that the last decade of demographic change where a new generation of workers is emerging in the workforce and new work styles, such as remote working, are becoming prevalent has fundamentally changed the way the technology we need to perform our tasks.

Our customers tell us that their analysis shows that office space is empty for 40%+ of the time – people in meetings in other rooms or working from home or travelling. In that scenario, having a deskphone is of little value. In fact, you will be more reachable if you have a softphone on your laptop or a mobile phone. I don’t pack up my deskphone when I go on a business trip or decide to work from home, but I will have my laptop and cell phone with me. If you wanted to be reachable by a critical customer, you have the choice of sitting by your desk all day or taking the call on your mobile or softphone based on your own preferences. Does someone at Avaya really think the best way to be reachable is to sit by a phone all day?

Our customers also tell us about the diversity in roles and the need for choice. Different workers have different needs of technology to be productive. Some are deskbound and will effectively be off the clock when away from the office (e.g. your receptionist). Others are mobile on premise (e.g. your typical worker). Some are totally mobile (e.g. your sales guy). Some are remote but in a fixed location (e.g. a teleworker). Some spend most of their day on the phone while others spend it in meetings or in an application (e.g. SAP, or Petrel). What’s needed is for these workers to have a choice of devices that they can use. An IP Phone may be needed for some. A PC softphone is appropriate for others. A USB device gives a lot of flexibility for comfort to workers. Legacy players have had vertical solutions where they own their phones. They have had little incentive to meet customer needs in this way as it increases their costs, and because customers have had no choice. What’s needed is an ecosystem of device manufacturers who innovate to meet needs of users based on open technology that enables them to plug into any voice infrastructure.

Our customers also tell us that voice has been silo’ed for too long and the iconic symbol of this is the deskphone. Almost all my other modes of communication and collaboration have become integrated (e.g. video, IM, email, unified messaging, conferencing) and importantly, many of these have converged on a PC. Telephony has been the last hold out. It’s critical to understand that as a worker I don’t want to reach phone or even to talk, I want to achieve a goal. Sometimes, that can be done using IM alone. Sometimes, I need a desktop sharing conferencing session. Sometimes video adds to experience. And with a PC, I can all of these communication modes from anywhere with Internet access. Except the old phone. That’s still back in my office so having to click to call makes little difference. Voice is just another communication mode and needs to be integrated in to the broader experience. Focusing on the device is pointless as the problem to solve is enabling more efficient communications. The device is just a means to an end.

I personally don’t have any issues with my softphone on my laptop. But it’s futile having that argument as I know people has their own experiences here. There have been huge technology leaps that have improved media quality and reliability of PCs to make it a contender. Given the cost savings, choice, and productivity enhancements customers should at least evaluate it as an option. You would be surprised how it performs and most importantly, how many of your workers embrace it. 

If folks in the industry would focus on solving the problem rather than defending the past, we might end up with some breakthrough solutions. Avaya and the other legacy telephony vendors have lots of smart people, they just need to address the right problem. Right now, it feels like Microsoft with Office Communications Server and Office Communicator is the only game in town. Instead of freaking out about the fact that customers are embracing our technology and approach and trying to punch holes, wouldn’t the industry benefit from more players trying to solve the real problem?

There was an interesting article by Eric Krapf on VoiceCon eNews about a recent report by Frost & Sullivan on the future of the deskphone.

One of the points in the Frost report was that despite vendors bundling in softphone clients as part of their telephony solutions, very few are being used as the primary solution for voice. No kidding!

Hardware vendors have systematically lacked an understanding of how to build software client experiences that meet users needs, whether it’s integrating experiences into existing applications, developing flexible client side APIs or enabling end to end scenarios. That lack of understanding often translates into a real lack of imagination too …. I mean, take a look at the two softphones below. Guess which is from the existing hardware based vendor?

With softphones like these, why would users adopt? Even the imagery hints at what the vendor really wants them to use … the expensive deskphone sitting next to them.

For softphones to be adopted broadly in the market, you need to think of a world where there are only softphones and mobile phones and design a solution around that. That’s the advantage of not having a hardware business to protect.

Gartner and Frost & Sullivan have different views on the future of the deskphone. I am biased, but I side with Gartner believing that a paradigm shift will happen where companies look at what is possible with softphone only solutions and rethink the need to buy deskphones at all.

For those that really need a deskphone, I suspect there will be a market. It will be increasingly dominated by device manufacturers that specialize in a portfolio of end user devices suited to a workers needs. The days of vertically integrated lock-in solutions must surely be numbered.

Analyst firm, Synergy Research Group, recently tried to size the UC market. Synergy claims to have “cracked the code” to develop a market size estimate that is superior to other analysis. I have to disagree.

The scope definition and inconsistent treatment of technologies leads to significant under sizing of the market. Synergy says they looked at the market for “collaborative applications”. That market is huge and includes Office, Sharepoint, OCS, Exchange in the Microsoft stable for example and could be in the $90B+ range, even if judged by revenue from Microsoft and it’s competitors today. And yet …

“Synergy estimates the 2008 worldwide sales for collaborative applications to total just over 33 million units and $4.6 billion in revenues. This represents strong annual growth from 26.8 million units and $3.8 billion on 2007, or year-over-year growth rates of 23% and 21% respectively. These totals include the sales of standalone collaborative applications as well as UC desktop application licenses representing pre-integrated UC systems.'”

Perhaps more important than an esoteric sizing exercise is the lack of a holistic view of the market. Unified communications encompasses a broad set of technologies that have typically been sold as silos. As these merge, the market will no doubt consolidate as efficiencies between silo purchases leads to discounts for integrated or bundled technologies. A narrow view of the market is sometimes indicative of the lack of recognition of this need for unification across silos.

When we took a look at the data on this market, we estimated an opportunity of $31B in 2006 and $50B in 2011. This represents a big market for the industry to chase after and is more exciting than the $4.6B identified in the Synergy research.

Microsoft has taken a unique view of this market. Our belief is that the industry is shifting in structure from a vertically integrated market (where the same vendor sells hardware, software, devices and sometimes even service) to a horizontal one (where different vendors specialize in hardware, software, devices etc. This approach not only unlocks innovation in the market as specialists working using standards can innovate more, it also opens up revenue opportunities for partners that were hitherto locked out of the market. A good example is devices. By enabling a partner ecosystem around devices, Microsoft is enabling access to a huge revenue opportunity that was previously locked up by PBX vendors. Our partners are excited by this possibility and the growth opportunities for them.

So I would encourage those trying to size the UC market to look holistically at the market and consider the real opportunity ahead for the industry.

A few years back, I complained about the lack of debt in Microsoft’s capital structure and the lack of accountability this fosters in the company. This week, Microsoft issued it’s first bonds to raise $3.75 billion at only a slight premium to US government debt!

My original blog post talked about our own leverage to purchase our first house. Clearly there has been a decline in the housing market, but if you apply leverage prudently, the principles still hold. And that’s what Microsoft is doing now. I am really impressed by the way our CFO has approached both our capital structure and cost structure …. it finally feels like Microsoft is a real company that has grown up from the tech start up money-to-burn mentality.

Now, we just need that accountability to run through our management chain a little more and Microsoft could live up to be the great company for shareholders that it has the potential to be.

My brother has been doing some freelance journalism while in Bangladesh and has been writing some really interesting pieces. He visited Pakistan recently and wrote up this piece on the recent terrorist activities there. He is becoming quite a good writer and I am proud of the work he is doing.

There is a link to a video in the article showing a woman being flogged for “being seen in public with a man other than her husband”. The video is incredibly disturbing to watch, but one that is worth looking at to see the gruesome treatment many receive in that part of the world.

I have long abandoned religion as a guiding force in my life, although I continue to find comfort in spirituality. Religion has come to depict the old human social concept of control. Over the millennia, control can be gained in the form of strength of arms or a monopoly on bigotry. I find strength of arms easier to understand but am floored by the apathy of people when it comes to bigotry. Bigotry has really taken off in the last 1000 years with both Christianity and Islam at the helm. But while Christianity seems to have emerged from the stifling era just before the Reformation, Islam has not.

Muslims are for the most part like any other people. My parents are Muslims …. they are the most peaceful and increasingly open minded (thanks to the shenanigans of their kids) people you could meet. And yet millions like them around the world turn a blind eye to the craziness perpetrated in the name of their religion. There are even some that justify it in their minds as a way to maintain morality in society.

Wake up folks. This is every Muslim’s problem. Every visit to the mosque should include a sermon on the values of Islam and denouncement of mindless violence. Most importantly, before looking to scapegoats to blame for problems, every Muslim should be asking what they can do for their own people and how they treat their own. I always remind my Dad that more Bengali’s died in the hands of fellow Muslims from Pakistan than any infidel. Suicide bombings kill their own kind. And the oil rich nations of the middle east continue to build skyscrapers while the Palestinians lack basic housing, schooling and sanitation. These are not the principles of Islam, but they are being tolerated way too much.

It sickens me that so many people around the world are prepared to turn a blind eye in this way. No country is without it’s faults and there is a lot to blame the West for over the last 200 years – from divisions established to further colonialism to modern hypocritical treatment of global issues. But the way to advance the Muslim world’s agenda is to look within first. Will the real Muslims please stand up.

A colleague in Indonesia sent this photo of RoundTable being used in Indonesia for a wedding. Apparently the couple’s friends were budget constrained but wanted to be part of the experience. Sound familiar? :-)

Through the integration of Microsoft Office, Exchange Server, Office SharePoint server and Office Communications server, organizations can have one infrastructure for communications and user experience, without the need to deploy different applications for a viable unified communications solution. With OCS, Microsoft has rolled out the foundation for integrating voice into the daily work flow of the office user in a similar manner as users employ instant messaging and email now. The addition of contact-based presence allows users to ensure they are available to communicate with who they want, when they want; this increases their productivity. OCS R2 still will not completely replace the PBX for large enterprise environments, since it lacks some of the basic features. But new call center type functions, conference features, voice mail and all the other office enhancements, will increase the viability of this product. The degree of integration into applications will help push voice further away from how it has always been done and into how it will be done in the future. Read more by clicking link below ....

Read the last paragraph and the ad on right :-)

"We've got to attract and recruit that next generation of workers. That's the way they communicate. They expect that same type of communication in a business environment."

"Today, many companies are facing the same challenges: how to improve communications and increase productivity, while reducing operational costs, and they are increasingly looking at unified communications software to help meet and solve these challenges. Last month, we highlighted telecom customers that are implementing Office Communications Server 2007. This month, we are taking a look at how manufacturing businesses are benefiting from implementing Microsoft’s unified communications software." Read more ...

Due Date: Mid August!